Corporations Cannot Bring CSPA Claims

October 9, 2013 in Ohio Consumer Sales Practices Act (OCSPA), Ohio Courts by Brad Council

The Third Court of Appeals in Ohio recently found, in Semco, Inc. v. Sims Bros., Inc., that a corporation is prevented from bringing claims under Ohio’s Consumer Sales Practices Act (CSPA) and affirmed an award of $26,130 in attorney’s fees against Semco for bringing such a claim in bad faith. 2013-Ohio-4109. CSPA governs consumer transactions between a supplier and a consumer and prevents a number of unfair, deceptive or unconscionable acts or practices. In particular, the court rejected Semco’s argument that they could bring a CSPA claim against another corporation for a transaction involving their employees.

In the case, two employees of Semco, a foundry, stole metal from the foundry and sold it to Sims Bros., a metal recycler. Semco sued Sims Bros. under a number of different theories for the value of the metal stolen from Semco. Among the claims brought by Semco, Semco alleged that Sims Bros. violated CSPA by purchasing metal from the employees even though they suspected it was stolen.

 To prevail on a CSPA claim, there must be a consumer transaction that violates the statute. CSPA defines a consumer transaction as “a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things.” ORC 1345.01(A). The Ohio Supreme Court has ruled that “an individual” refers only to a natural person and does not include a business entity, such as a corporation. Culbreath v. Golding Ents., L.L.C., 114 Ohio St.3d 357.

 Semco asserted that a consumer transaction occurred between Sims Bros. and its employees when it purchased the stolen metal from them. As the metal belonged to Semco, it argued that it was entitled to stand in the employee’s place to file suit against Sims Bros. Without addressing other problems with characterizing the transaction as a consumer transaction, the Court found that the Plaintiff in a CSPA suit must be a natural person. The court found the “stand in the shoes” argument proposed by Semco to be erroneous and that as a corporation Semco is expressly prevented from filing a CSPA suit.

 CSPA may only be used by individual consumers and all forms of business entities are forbidden from filing suit under the Act. In addition, the Act does not allow businesses to file suit on behalf of an individual who has engaged in a consumer transaction. In Semco, the trial court found that alleging such a claim as a corporation amounts to bad faith and awarded attorney fees to the defendant for Semco’s claim under CSPA. The court also ruled against Semco on all other claims. The Appellate Court affirmed the trial court’s decision including the imposition of attorney’s fees against Semco for filing a claim under CSPA in bad faith.

** Many thanks to William Abbey for his contributions to this article.  William is a law clerk with Slovin & Associates Co., L.P.A. and student at the University of Cincinnati College of Law.  **